tv Nightly Business Report PBS April 2, 2013 1:00am-1:30am PDT
was up more than 8% in the first quarter and eight of those times the average added at least 1% in the ensuing or second quarter and five of those times the dow rose more than 4%. of course, history is rarely a perfect guide to the future and what you want to know now is what might make you some money in the second quarter and beyond. well, one strategy that has paid dividends in recent years is to invest in companies that pay dividends. but our market guest tonight says that approach is so 2011. he's seth masters chief investment officer at bernstein global management. good to have you with us. why are you down on dividend paying stocks as an investment strategy right now? >> well, they have gotten expensive. that's because as you said they were extremely popular after the 2008 crash really. a lot of investors who wanted to stay in stocks but wanted something relatively safe within the stock market felt higher
yielding companies were a safer version of stocks. as a result, they have outperformed the rest of the stock market over most of the last four years. >> so seth, what should people do if they have their portfolios loaded up with the blue chip high quality companies that pay good dividends? can they still hold on to them for a little bit longer or do you suggest they unload them right away? >> well, i think it would be an excellent time to look at the other things that are in the stock market that we think are a bit more attractive. here's an easy way to think about that. dividend paying stocks that have relatively high dividends historically have been about a third of the total capitalization of the s&p 500. today they're almost 45% of the broad index. and usually, things like that are cyclical. things that have done really well and have become bigger and bigger in the index tend to revert back to their long term level. and that means that the rest of the stocks, the other 55% of what's in the market is likely
to outperform we think going forward. >> from what you just said, i can iner fer that the indexing funds that mimic the s&p 500 are overvalue as well? >> a great point, absolutely. look, indexes sometimes outperform, sometimes don't. just index is another portfolio that happens to be built by the s&p or another index provider and right now, those indices are rather dominated by high dividend yielding stocks. i do think that when we look back at today from perhaps two or three years in future, we'll find this is a good time for stock pickers. >> tell us where investors should be picking their stocks. i know you can't give us specific names, but give us guideposts of where to put our money for the next couple of months. >> the places that are interesting are the places that are the opposite of perceived safety. dividend yield is perceived to
be safe. what's not so safe is things that have a lot of growth and can be exciting or a lot of value because they can be very cheap. so let me give you an example of each. in the value domain right now we think there are lots of opportunities from stocks that were really hit hard because of 2008. so for example, the residential real estate market was the source of the problem in 2008 really and the companies that were most involved with it were hammered over the last few years. now, some of the stocks in that domain including some of the lenders who financed real estate, some of the title search companies, some of the home builders have pretty attractive outlooks for -- as a stock to own, because they've become so cheap. >> forgive me, seth, i thought the home builders had been on a good run. i thought they doubled over the past year, so if you tie that together with a thought on growth companies for us. >> right. in the growth domain, i think there are a number of areas which are very interesting.
one of them is in energy. there are lots of companies that are in the oil field service area in particular that we think stand to benefit from the explosion in production of tight energy, both oil and natural gas. unfolding across the united states and we think continuing for the next few years. >> thank you for your perspective tonight. seth is chief investment officer at bernstein global wealth. coming up later investment clubs are making a comeback. and jane wells will show us how they're coming up with the right strategies to handle the markets. >> investors are closely watching political tensions in north korea. the u.s. sent stealth fighter jets to south korea and the u.s. navy shifted a guided missile destroyer in the pacific. now, these moves come as north korea's leader kim jong-un said over the weekend he's entering a state of war with south korea. and threatened military action
against south korea and the united states. joining us now to talk about what all this could mean for the global economy and the markets, ian bremer, a political risk and research and consulting firm. let me begin you with a basic question. what does kim jong-un really want? >> it's very clear his state of war does not preclude doing business with the south. their joint industrial park in north korea is still open, so it's not like he's about to start launching rockets into south korea. i think what he clearly wants is more money, more respect and he probably wants a restart of the negotiations with the united states from a position of greater strength. he has clearly failed on absolutely every one of those counts over the last two weeks. i think that's what's actually agitating observers, not the notion that we're at the
precipice of war. >> this guy is new, ian. he's 28, 29 years old. maybe 30 if we're to believe the press reports. where is his off ramp? how does he get out of this and not lose face with the generals who have so much power in his country? >> you know, the funny thing he's the longest standing head of state in east asia, compared to the president of south korea and president park in south korea. he's got the longest run of power, but he's only been in place for about a year. 29, 30 years old. and the question of how he backs up the truck is an interesting one. because, look, it's not hard for him to do it in terms of the people because they have extraordinary propaganda. he can say white is black and get away with it. the real question is how does he look to the military, how does he look to the political leaders as everything he has done over the past months has failed. and so if he backs off, do we
start to see instability in the regime? and if he feels the need to continue to provoke at what point does that lead to the kind of action that actually really is dangerous? that does blow up a ship or, you know, he does actually take an action that requires south koreans or u.s. military engagement. i don't think we're there yet. but, you know, that has to be an issue that we are now in the markets watching closely in a way that a couple of months ago frankly we didn't care. >> let me ask you, ian, something more on the business side of this, because we know that south korea is a big economy and a big player in the whole tech supply chain. if there's any disruptions, i mean, they supply everything for the components that we need for tvs and cell phones and computers. if there's a disruption here because of the political side of the equation, what kind of economic threat is there? >> well, it's one of the largest economies in the world. it's very integrated with the west. in terms of supply chain and direct trade. south korea matters.
a lot of american companies have a lot of investments over there. they have a lot of expats over there and so far, nothing has changed. if we were to start to see north korea really implode and i think more likely than them blowing up the south is that the regime starts to fall apart and then you see refugees and major tensions between the u.s. and china. then suddenly south korea is in a very bad place. the economic markets would come up dramatically and suddenly and supply chains would be disruptive. certainly the kind of disrupt n disruptions we saw in japan. you'd see major electronic manufacturers suddenly shorthanded in terms of product. that would happen in that environment. it's north korea, it's just not a stable place. it's an issue to watch out for. >> we'll be watching it.
thank you so much, ian bremer, president of the eurasia group. well, investors bailed out of the chip stocks because so much of their products are produced in south korea. also, an industry sales report showed that chip sales were down sharply earlier this year. dow component intel dropped 2%. amd is also off. toys "r" us is pulling its plan to take the company public. they're citing tough market conditions and that its ceo is stepping down. well, despite toys "r" us' decision, the ipo market is remaining active. jackie deangelis looks what's in the pipe line for the quarter and the rest of the year. >> ipo activity held steady with 31 deals for companies with market cap over 50 million, raising $7.6 billion according to renaissance capital. ipo performance outpacing the
broader market with an average total return for the quarter of 18%. there was also a notable shift toward yield plays. that said, when looking at the pipeline for the rest of the year, couple of things to consider including recent legislation that allows smaller companies to file confidentially. many are electing that option. that could make the pipeline appear smaller, but renaissance capital says there's actually a lot of activity occurring behind the scenes. that's some of the deals we'll be watching for in the coming months, bausch & lomb, seaworld, cdw, covering a broad range of sectors. more tech deals are expected later this year. companies like market o, fire eye have filed confidentially, while several others have reportedly hired banks in preparation for ipos. on tap, independent bank group of 3.2 million share offering
and harvard apparatus regenerative, a smaller one. so watch for that. a big decision by the government today impacting millions of americans who get their insurance through medicare advantage. bertha coombs is here to tell us about it. it's a complicated issue. >> well, it's a private insurance and medicare does reimburse those insurers. more than 15 million -- 14 million seniors buy those from insurers. they're popular. to get the extra coverage beyond medicare itself. cms the health department's center for medicaid and medicare services said that the growth rate for reimbursing the insurers in 2014 is going to be over 3%. a big reversal from their proposal last month that would have cut medicare advantage rates by more than 2%. they based that reversal in part because of a statutory medicare rule that normally cuts doctor
reimbursement rates. next year it would be a cut of more than 20%. but the doctor rate reimbursement cuts which most people in medicare watch very carefully never happened. for ten years congress has instituted the doc fix. after heavy lobbying from insurers and members of congress and from both sides of the aisles and seniors themselves, cms today said it is setting plan growth at 3.3% instead, they're assuming that there will be no doc fix and no reimbursement to the doctors next year. at the same time, they're capping how much plans can increase rates on seniors to no more than $34 a month, down from $36 a month. on average, it might be about $20. >> so two quick questions. what does this mean for the medicare advantage seniors who use that coverage and what does it mean for insurance companies?
>> well, the head of the insurance problem by ahip was saying she applauded this. cms is taking an important step to stabilize medicaid advantage. a number of the carriers might have pulled out of medicare advantage for next year which would have left seniors with fewer options and most likely higher costs. it's more stable. they'll continue to provide it next year. >> so the bottom line is it's good news for medicare advantage participa participants? >> good news and good news for the insurers as well if you look at humana shares a couple of months ago. they went down, but today they rallied again. >> coming up as the market strengthens investment clubs are making a bit of a come back. we're showing you how they approach the conditions. but first a look at the international markets today.
stephen a. cohen is a wall street legend. he runs one of the largest and most successful hedge funds, but the arrest friday of a top cohen deputy on insider trading charges refocuses attention on how federal authorities are building a case against cohen himself. we have the very latest. how is s.a.c. capital reacting to this arrest? >> they're actually showing
quite a bit of support for michael steinberg, this man who was indicted on five different charges of securities fraud stemming back to insider trading. this is an outgrowth of a prosecutorial effort that goes back five or six years. most people think they're going after cohen personally. they sought to distance themselves from the nine employees who were implicated. but they said that michael steinberg is a highly ethical guy. >> yet, he's been on company leave since last september. >> that's right. he's an a paid company leave. if you read the tea leaves here, that indicates the company is supportive of him. they don't want him to suffer economically while he's under scrutiny. but at the same time, they can't have him in the office when it's possible that he's going to be charged as he was with criminal wrongdoing. >> tell us about steve cohen himself. there's been so many insider trading cases but he's a big
fish, could he be implicated here? >> this is the burning question, will the feds be able to charge steve cohen? they have been trying to for quite a long time. he's worth $10 billion or $11 billion. he personally and others who are high up in the firm have $9 billion in this firm. so if steve is charged i think it's probably curtains for s.a.c. there is no obvious number two who can lead the firm if he were to depart. most of the capital involved is his. so if he were or the charged it would be very damaging for them and a thousand people potentially out of jobs. >> he's been -- he's been acting like a fairly confident man, buying a new property. >> that's right. he's been very active in terms of art and real estate of late. he made a significant financial contribution to help veterans suffering from post-traumatic stress disorder. >> kate kelly, thank you. >> keep us posted on that one. turning to the market focus, commodity and equipment stocks
were in the spotlight in today's trading. that disappointing factory report as well as weak manufacturing data from china pressured the sector. alcoa, caterpillar, each down 1.5%. u.s. steel losing 4% and joy global which makes mining equipment fell almost 3%. at&t led the dow gainers today. the company will start selling the newest kindle fire beginning on friday. this is the hd kindle version. buyers using a two-year at&t data plan will get a $150 discount. the shares rose to $35.25. that little company called walmart was up as they announced 15 cents a gallon gas discounts at 2,100 locations for the holders of the credit and debit cards. the shares are up today, by 60 cents at $75.43. a little less than 1%. and nasdaq is acquiring the
e-speed platform entering the u.s. treasury's trading business. it's a major player and a it expects volumes over 500 billion daily to increase. well, we have been telling you that the markets have been rallying this year. but most individual investors have been watching, not pers participating. they have been afraid to put their money in stocks. but it can be changing. >> from an office outside of chicago to the hills north of l.a. -- >> we're in a transition. >> americans are investing through clubs. though not like they used to. >> i'm collecting money now. >> this was the scene in 2000 with pooling funds and researching stocks was the way that average folks made fast money. by one count there were 400,000 investment clubs at the peak. a number that's collapsed, but not completely. >> got a good trend on the
weekly. >> in arlington heights, illinois, nick started this fund after his 401(k) was destroyed in 2008 to take matters into his own hands. >> we only knew how to buy stocks, so then we learned how to sell stocks and then do options. then we learned how to do to option strategies. the spreads. >> members do not pool their money, but manage their own portfolio. >> i wish i had known this five or ten years ago. it would have saved me a lot of money. a lot of headaches. >> in california, an all-woman investment club has survived since 1997. why all women? >> i don't know, it's just easier. >> over the years the women invested this pfizer, after learning about a new drug called viagra. they met warren buffett, but after buying lehman brothers and losing big, they made some changes. >> we have put in stop loss orders. >> no stock has them as divided as apple. >> i'm bearish on buying more apple. >> i feel like sometimes we sell too soon.
>> keep it. and buy more. >> now as the markets hit new highs, many clubs are trying to figure out what strategy to use. the women believe the market is due for a correction. the club in chicago agrees. >> the market is priced to perfection. >> even when they think it's topped -- >> it's going parabolic. >> you have to wonder. for "nightly business report," jane wells, los angeles. it's no longer take me out to the ball game. you can take the ball game with you wherever you go. a major business for major league baseball. but first, let's look at the commodities and the treasuries traded today.
the sport revels in the past like baseball, now major league baseball is finding real money, its real moneymaker is in the future. as brian shactman tells us the future is now. >> throw that pitch. >> opening day at mlb advance media. the more tech start-up than office and there's a reason. the old school game of baseball dominates new media. >> you open up your mobile device, a phone or a tablet. you get up to date. you can see a highlight. you can see live video if you have that service. >> bob bowman is president and ceo of what many call ml bam. forbes says it's worth $6 billion. much of the value has to do with mlb at-bat. the most successful app in the world. downloaded 7 million times last
year. >> it's growing at better than 20% a year and i think the revenues will continue to grow at a double digit rate because of the demand for the products and the increase in the uses in the way people can use their products. >> along with mlb.tv, users can watch out of market games in any place, on any device. they edit and public 25,000 video clips a day during the season. >> it's as reliable as rain. we want sunny days here for sure. but what we know is you turn it on, it will work. >> reliability and mobility is part of the reason baseball dominates mobile, but it's also volume. 30 teams and 162 games each. >> baseball is ideally suited for the digital media. we play 162 times a year, you never know who's going to win. you're watch happy to watch the or the seventh inning. >> for "nightly business
report," brian shactman, new york. >> nothing like going to a real game though. today was beautiful for opening day. not good for yankee fans, they lost. but for met fans including our producer, it was a good day. they won. >> mets won big time. i think they scored all the runs for the month of april today, the mets did. anyhow, thank you so much for being with us on "nightly business report." i'm tyler mathisen. >> i'm susie gharib. have a great evening, everyone. hope to see you back here tomorrow night. >> "nightly business report" has been brought to you by -- >> the street.com. interactive financial multimedia tools for an ever-changing financial world. our dividend stock adviser guides and helps generate income during the period of low interest rates. options profits, helps educate beginning and seasoned options traders. action alerts plus is a charitable trust portfolio that provides trade by trade strategies. online, mobile, social media. we are the street.com.
many of us are trying to find ways to build a more sustainable world for future generations. we're concerned that our planet's wellbeing isn't as secure as it once seemed. ma: there's only one brand, apple, that has a long-term policy not to disclose its supply chain. angelei: we don't want the sort of development that wipes out a way of life for people, that wipes out a culture. gariguez: we did a hunger strike. we are willing to offer our lives and we are willing to die. interpreter: what happened in ituzaingo is a hidden genocide because they poison you slowly and silently. interpreter: we shared in the realization that common people must come together to defend their rights and we must never give up. "the new environmentalists" -- ordinary people effecting extraordinary change.
lake turkana provides a vital lifestream for the people of the severely challenged desert region of kenya. a proposed dam on the river that feeds the lake will threaten the very existence of the inhabitants of this vast, arid landscape. i think there are all sorts of questions about the dam. there is long-term implication of environmental damage and the loss of livelihoods and the disappearance of a lake which provides fish. and the fact that traditional nomads and pasturers are being forced into new areas, crossing international frontiers to find limited amounts of grazing and this has always before and will again, for many years, led to conflict. when richard leakey brought the whole issue about what's happening with the dam,